Panel warns of tech links to China

WASHINGTON American companies should avoid doing business with China's two leading technology firms because they pose a national security threat to the United States, the House Intelligence Committee is warning in a report to be issued today.

The panel says U.S. regulators should block mergers and acquisitions in this country by Huawei Technologies Ltd. and ZTE Corp, among the world's leading suppliers of telecommunications gear and mobile phones.

Reflecting U.S. concern over cyber-attacks traced to China, the report also recommends that U.S. government computer systems not include any components from the two firms because that could pose an espionage risk.

“China has the means, opportunity, and motive to use telecommunications companies for malicious purposes,” the report says.

The recommendations are the result of a yearlong probe, including a congressional hearing last month in which senior Chinese executives Charles Ding of Huawei and Zhu Jinyun of ZTE testified and denied the companies posed a threat.

A U.S. executive of one of the companies said the firm cooperated with investigators and defended its business record. Huawei is a “globally trusted and respected company,” said William Plummer, vice president for external affairs.

The bipartisan report is likely to become fodder for a presidential campaign in which the candidates have been competing in their readiness to clamp down on Chinese trade violations. Republican Mitt Romney, in particular, has made it a key point to get tougher on China by designating it a currency manipulator and fighting abuses such as intellectual property theft.

The panel's recommendations will likely hamper Huawei and ZTE's ambitions to expand their business in America. Their products are used in scores of countries, including in the West.

Both firms deny being influenced by China's communist government.

“The investigation concludes that the risks associated with Huawei's and ZTE's provision of equipment to U.S. critical infrastructure could undermine core U.S. national-security interests,” the report says.

The report says the committee received information from industry experts and current and former Huawei employees suggesting that Huawei, in particular, may be violating U.S. laws. It says the committee will refer the allegations to the U.S. government for review and possible investigation. The report mentions allegations of immigration violations, bribery and corruption, and of a “pattern and practice” of Huawei using pirated software in U.S. facilities.

User Agreement

Keep it civil and stay on topic. No profanity, vulgarity, racial
slurs or personal attacks. People who harass others or joke about
tragedies will be blocked. By posting your comment, you agree to
allow Orange County Register Communications, Inc. the right to
republish your name and comment in additional Register publications
without any notification or payment.